Blockchain in Shipping: Is it just a hype or the next big thing?

‘This would be the biggest innovation in the industry since containerization!’ says Bloomberg. Blockchain is the ‘next big revolution in shipping’, Wartsila adds. 

Blockchain’s current hype is probably the reason for hearing about its countless benefits. However, “the best networks are often the hardest to create” says Camille Egloff, the Boston Consulting Group’s Global Head of T&L. Her newest report Resolving the Blockchain Paradox in Transport and Logistics illustrates that 88% of the people believe that blockchain will disrupt the industry, yet nearly three-quarters (74%) say that they’re exploring opportunities only superficially or haven’t thought about blockchain at all. Why is that so? We interviewed Camille and discussed different strategies that you can use to benefit from such technology-based networks without investing too much time and money.

Blockchain seems to be far away for most SMEs – especially given the “blockchain paradox” that you outlined in your recent BCG study. What first steps do companies need to take to get ready for blockchain in shipping?

In our view, the benefits of being among the first to join these collaborative efforts far outweigh any advantages of a cautious approach. First movers can both influence the development of standards and ensure that the solutions they would like to apply in their own operations are among those widely adopted among the value chain. Late movers risk finding themselves shut out – particularly if competitors are already participating.

A good way to start is to make sure your own data and systems are consistent and up-to-date. Learn about the technology, obtain a deep understanding of the limitations and identify current pain points. Before launching blockchain at scale, a company should conduct proof-of-concept tests to check viability of potential applications. Create APIs (Application Programming Interface) that allow you to share your data with different platforms! For those proofs of concept, the company should then design plans to implement at scale and commercialize in stages.

How can T&L overcome fragmentation and create data standards, especially when some companies benefit from the lack of transparency?

Overcoming fragmentation is not all in or nothing! It’s everyone’s own decision to think about what data is really crucial as a competitive advantage or differentiator and what is not and could potentially be shared. For starters, we expect the emergence of consortia with shared interests that start to create (semi-) public data pools. Moreover, 3rd party platforms that act as “connectors” in the industry will play an increasingly important role by transforming different data standards into one “format”. For industry participants, it will require a certain level of commitment to test a new platform though. I can only advise to be open for some level of data sharing, sign up for a short-term contract and optimize the way you use the platform over time. Start with a limited data pool only and then increase collaboration via APIs—for example when you’re fully convinced by the services the platform offers.

You mention that traditional technologies are still the right choice for transactions and processes that involve a small number of parties who already know each other – What are viable alternatives to create efficiency in peer-2-peer collaboration?

Although blockchain is often the best option for creating trust, traditional technologies are still the right choice for transactions and processes that involve a small number of parties who already know each other or for whom it is easy to establish a single, indisputable source of truth. There are two viable alternatives for blockchain in shipping to foster peer-2-peer collaboration: Firstly, you can always set-up bilateral APIs if you already know your partner very well and just want to improve efficiency in collaboration. And secondly, in cases where bilateral trust is not there yet, companies can join neutral platforms or clearing-houses that are operated by a trusted 3rd party. These platforms can then make sure that transactions are secured, and network members can trust each other. Moreover, they can also improve efficiencies through paperless document transfer or easy to use payment handling even without educating yourself on the underlying technology itself.

An example for such a platform is Container xChange which was created out of BCG a few years ago. The neutral online platform creates transparency in container logistics and connects you to more than 300 container users and owners with only a few clicks. Even if you’re not 100% sure about what data you want to share via API, you can sign-up for their platform and find new one-way partners or use their comprehensive container tracking system. And thinking about the workload of your own IT-teams: Another benefit of such a platform is that it helps to avoid creating APIs for every single company your work with—the number of interfaces you need to create is limited to 1.

Companies are concerned to join such platforms or blockchain networks when they’re owned by one of their competitors. Who could own such a network to mitigate mistrust?

With BCG we see two potential ownership structures in order to establish a network with a high level of trust. A peer-2-peer collaboration network could be owned by either a large industry consortium or by a neutral tech-based company with no own interests in logistics. While it is certainly complicated and time consuming to bring a larger group of companies involved in container logistics together, there are some existing examples such as INTTRA in its early days.

Today, some companies and small consortia are trying to gain traction—such as IBM/Maersk—but they are struggling as companies do not want to give their data away to a competitor. A tech player or a completely neutral platform with no own interests in shipping could solve the problem. Again, xChange comes as a handy example by providing a completely neutral platform without any industry investment. More than 300 companies use the platform already and its processes and technologies make sure that members can trust each other.

How can companies identify the one platform that really helps them get ahead?

As BCGs analysis indicates, most industry participants have not taken a deep look at blockchain’s potential applications. Our analysis of the opportunities makes clear that companies should be investing time and effort in order to take advantage of the benefits that those technologies promise. To get started, companies need to map out processes and pain points within their organization to understand what they really need. Examples could be a difficulty to balance out liquidity for containers in specific locations, time consuming and paper-based processes or something completely different.  Once you have identified your paint points, scout the market and identify SaaS offerings that could solve the biggest issues first. Oftentimes there is no such thing as the one and only platform that covers all of your needs—but many platforms allow for “bundling” and connections via API. In the end it is an investment! It takes time to find the right solutions and test different tools or platforms in the beginning, but it helps you save huge amount of time and costs once you figured out how to use a specific platform properly.